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Homeglobal investing hot spotsWorld capital of blockchain is now rising in the Middle East

World capital of blockchain is now rising in the Middle East

The lowest floor of the Emirates Towers in Dubai houses the government's Future Foundation, which is sucking in innovative companies from around the world for a stint in the city's $300 million accelerator program. On a visit last summer, there was a company building a health scanner that looks like a phone booth, and plants grown on mist without soil. And, next to those, was a company called ConSensys that doesn't look particularly futuristic. It looks like a group of software developers working at their computers.

The iconic Emirates Towers in Dubai, United Arab Emirates.Getty Images

But ConSensys — a New York-based blockchain software company —is one of a growing wave of companies lured to Dubai to help build out the one of the world's most powerful new technologies: blockchain. Amid aggressive competition from other cities, Dubai is turning into a center of blockchain development. Reid Hoffman, founder of LinkedIn, says blockchain could be as earth-changing as the Internet, as it reshapes the way people transact with each other.

The brainchild is Dubai's Crown Prince Sheikh Hamdan bin Mohammed Al Maktoum who wants all government documentation —such as visa applications, bill payments and license renewals — to be transacted digitally using blockchain by 2020. As a result, businesses are adapting fast, and many start-ups and big companies are shifting to accommodate the government, or relocating to Dubai.

Dubai Crown Prince Sheikh Hamdan bin Mohammed Al Maktoum (center), attends presentation and first flight of the Volocopter 2X used as Autonomous Air Taxi, in Dubai, United Arab Emirates, on September 25, 2017.Balkis Press | Sipa USA | Sipa | AP Images

It's attracting involvement from companies including IBM, Cisco and SAP and a dozen or more others who are part of a Global Blockchain Council or are working on blockchain applications in Dubai. Dubai is already home to a bitcoin exchange, BitOasis, and other start-ups and accelerators devoted to blockchain are springing up, as well.

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Dubai is parlaying its position as a global trade crossroads and its government's $4 billion-plus annual spending on innovation in general into a leadership position.

"Dubai has wagered on their position in trade, as a global crossroads," said Marie Wieck, general manager of IBM Blockchain, who leads a team of 1,500 around the world focused on the technology. She was in the Emirate in October at a blockchain event attended by hundreds of people working on blockchain applications. "Based on where their economy is, it is really just a natural that they would be betting on blockchain."

An Emirate in transformation

A blockchain is a network that combines a ledger with the digital item being transacted, permanently, in a way that can't be changed. In a paper world, a ledger entry is separate from a transaction. In a blockchain, the digital item being transacted, like an electronic unit of currency or an electronic copy of a deed, contains its own ledger of transactions.

The first application of blockchain has been in the development of cryptocurrencies like Bitcoin. (Dubai is also home to an early bitcoin application company called BitOasis). ICOs – independent coin offerings – allow investors to bet on which cryptocurrencies will stand the test of time. Many of them are taking place in Zurich, and other places without stiff investor protection laws. The explosion of cryptocurrencies and fluctuations in their value led JP Morgan CEO Jamie Dimon to warn investors against them – and has led to talk of a speculative bubble in the area.

Based on where their economy is, it is really just a natural that they would be betting on blockchain.Marie WieckGeneral manager of IBM Blockchain

The bigger revolution is going on outside the headlines, in the development of other new applications on top of blockchain technology. Worldwide, blockchain seems likely to destroy millions of jobs in record-keeping and transactions, like those in the back ends of banks. What form the replacements for those jobs take and where they will land is an open question – and Dubai wants to snag as many of them as it can.

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